http://americaspeaksink.com/2009/10/charlie-crist-and-the-film-outrage/

Absolutely. And to do that we need to give the consumer more power. And to do that we need a Consumer Protection Agency.

A few points: there are plenty of (a) agency ARM mortgages; there are also plenty of (b) subprime fixed mortgages. The default rates on (a) are considerably lower than on (b).

If I am a large industrial company and I’m worried that my health care provider is going to go under, doesn’t it make sense to buy some CDS on them? (this kind of scenario isn’t that uncommon).

The media has sensationalized a bunch of financial buzzwords– the “toxic lexicon”– and everyone just blatantly repeats it. This makes me sad. I’m all for regulation, consumer protection, etc., but just calling any financial product that was in any way involved in the crisis “horse manure” is just silly.

The CRA was perhaps the largest welfare scheme in American history. It pushed imprudent, risky lending practices for the less fortunate on a massive scale as a prerequisite for banks to stay within the Fed’s good graces. A set of practices that encourages lending in the trillions of dollars to a special preferable class of poor people with low FICO scores, little capital, and inability to repay the loans, will only to financial ruin, which it unfortunately did.

The Credit Default Swap scam needed the government guarantee to interest the market. If there was no allusion of a guarantee, many of the MBS scams wouldn’t haven’t taken hold as they did. Preferential government intervention into the marketplace, if not tightly controlled and fully transparent, will almost always turn into a scammer’s paradise.

Now, back to my regularly scheduled bile.

We should be applying the precautionary principle here. The right analogy isn’t the NTSB investigating a crash after the fact but the FDA requiring drug trials to prove safety before a product is approved.*

This should be the standard for alleged financial innovations.

2. But are these innovations at all, or “innovations”? It’s clear that nothing the finance sector has done in decades has served any social or value-adding purpose at all. The only purpose has been antisocial profit, rent-seeking and con jobs.

3. So we should reject in principle the proposition that we need to tolerate the existence of the finance racket at all.

Having established that, the only order of business would be developing the attack plan to destroy it.

4. As the current example demonstrates, “regulation” cannot in fact work. You cannot set an anodyne goal and then successfully restrain a powerful, entrenched racket. The evidence is dispositive.

A. The existing political cadre is too captured and corrupted to overcome the fierce resistance the rackets put up against even meager reforms like the CFPA.

B. Even if you could get something enacted which could in theory do the job, and even if you started out with regulators who were principled and willful, regulation automatically faces a permanent war of attrition vs. lobbying, bribes, extortion, and seduction.

The rackets will forever seek to undermine, evade, and gut all regulation. This is their very nature. So if you believe in regulation, you have to believe in the permanency of incorruptible, strong-willed, public-principled regulatory personnel.

I think the evidence has long since proven that you cannot trust the accident of having good personnel where the structure militates against it.

5. So the only solution is to change the structure. That means, for starters, breaking up the TBTF rackets once and for all.

[*Of course under Bush the FDA largely abdicated as well. So here too we see: regulation cannot indefinitely work where a corporatist structure systematically works against it.]